DTAA Between India And Hong Kong: Tax Relief, TDS Rules & Benefits in 2025

Cross-border income often creates taxation challenges, leaving NRIs and businesses worried about paying taxes twice. To address this, the DTAA between India and Hong Kong establishes a transparent system that prevents double taxation on earnings, including salaries, dividends, royalties, and capital gains. This bilateral agreement not only safeguards financial interests but also strengthens trade and investment between the two regions. By offering clarity, predictability, and relief from excessive tax burdens, the treaty ensures smoother compliance while promoting greater economic cooperation for individuals and enterprises alike.

DTAA Between India and Hong Kong - Quick Info

This table provides a consolidated overview of the key features of the India-Hong Kong DTAA, offering a quick reference for taxpayers.

Objective of the DTAA Between India and Hong Kong

The primary objective of the DTAA between India and Hong Kong is to establish a stable and predictable tax environment that fosters economic synergy between the two jurisdictions.

• Preventing Double Taxation: The primary goal is to ensure that income earned in one jurisdiction by a resident of the other is not taxed twice.
• Promoting Bilateral Investment: By providing tax certainty and often lower tax rates, the DTAA encourages businesses and individuals to invest and operate across borders.
• Preventing Tax Evasion: The treaty includes provisions for the exchange of information between tax authorities, a critical tool in combating tax evasion and ensuring compliance.
• Allocating Taxing Rights: The agreement clearly defines which jurisdiction has the primary right to tax different types of income, thereby helping to avoid tax disputes.
• Facilitating Trade and Services: By streamlining tax processes, the DTAA supports the smooth flow of trade, technology, and professional services between India and Hong Kong.

Significance of DTAA for India and Hong Kong

The significance of this agreement is rooted in the strategic importance of both India and Hong Kong as major economic players in Asia.

• Benefits for Investors: The clear DTAA tax framework gives investors from both sides the confidence to engage in cross-border investments. The reduced tax rates on dividends and interest make investments more attractive and financially viable.
• Support for Businesses: For the numerous Indian companies operating in Hong Kong and for Hong Kong firms investing in India's vast market, the treaty is essential. It provides clarity on how business profits will be taxed, particularly concerning a "permanent establishment".
• Clarity for NRIs and Expatriates: The agreement offers clear guidelines on the taxation of salaries and other income for the large number of Indian professionals working in Hong Kong and vice versa. This is a crucial aspect of the income tax rules for NRIs.
• Enhancing Transparency: The DTAA India-Hong Kong enhances transparency and enables tax authorities in both jurisdictions to effectively curb tax avoidance and evasion, thereby strengthening the integrity of their tax systems.

India-Hong Kong DTAA Tax Rates

A key benefit of the DTAA is the provision for lower withholding tax rates on certain types of cross-border income. The DTAA rate between India and Hong Kong is generally lower than standard domestic tax rates. [1]

Note: Interest earned by government bodies, such as the Reserve Bank of India, is often exempt from tax in the source jurisdiction.

Taxes Covered under DTAA Between India and Hong Kong

This agreement applies to taxes on income imposed by each jurisdiction. It is essential to know which specific taxes are included to understand the scope of the treaty.

• In India, the DTAA covers:
  • Income Tax, including any surcharge thereon.
• In Hong Kong, the DTAA covers:
  • Profits Tax.
  • Salaries Tax.
  • Property Tax.

This comprehensive coverage ensures that most forms of income earned by residents of either jurisdiction are protected from double taxation.

Taxation on Capital Gains under the DTAA Between India and Hong Kong

The agreement provides specific rules for the taxation of capital gains from the sale of assets, which is a key concern for property investors.

• Gains from Immovable Property: Gains from the sale of immovable property (like land or buildings) are taxed in the jurisdiction where the property is physically located. This is a vital point for NRIs who can buy property in India.
• Gains from Shares:
  • Gains from the sale of shares in a company are generally taxable in the jurisdiction where the company is a resident.
  • An important exception is if the shares derive more than 50% of their value from immovable property; in such cases, the gains can be taxed in the jurisdiction where that property is located.
• Gains from Business Assets: Gains from the sale of movable property that is part of a "permanent establishment" (a fixed place of business) are taxed in the jurisdiction where the permanent establishment is situated.
• Gains from Ships and Aircraft: Gains from the sale of ships or aircraft operated in international traffic are taxable only in the jurisdiction of residence of the enterprise.

Taxation on Employment Income Under DTAA

The rules for employment income provide clarity for the growing number of cross-border employees between India and Hong Kong.

• General Rule: Salary, wages, and other similar payments are generally taxable in the jurisdiction where the employment is exercised (i.e., where the work is physically performed).
• The 183-Day Rule (Short-term Employment): An individual's salary is taxed only in their jurisdiction of residence if all three of the following conditions are met:
  1. The individual is present in the other jurisdiction for a period not exceeding 183 days in any 12 months.
  2. The salary is paid by an employer who is not a resident of the other jurisdiction.
  3. The salary is not borne by a permanent establishment of the employer in the other jurisdiction.
• Directors' Fees: Fees paid to a member of the board of directors of a company are taxable in the jurisdiction where the company is a resident.

What are the Documents required to claim DTAA TDS?

To claim the benefits of the lower TDS rates under the DTAA, certain documents must be provided to the tax authorities or the payer.

• Tax Residency Certificate (TRC) from the tax authorities of the jurisdiction of residence.
• Self-attested copy of the PAN Card (for transactions in India).
• Self-attested Form 10F (for transactions in India).
• A declaration stating that the individual or company has no Permanent Establishment (PE) in the source jurisdiction.
• For certain property transactions, a Lower TDS certificate for NRIs may also be required.

How to Claim DTAA Benefits?

Claiming the benefits of the DTAA between India and Hong Kong involves a specific procedure during the tax filing process.

• In India (for Indian residents earning in Hong Kong):
  • Declare your global income, including the income earned in Hong Kong, when filing your NRI income tax return.
  • Pay tax on this global income in India according to the applicable tax slabs.
  • Claim a Foreign Tax Credit (FTC) for the taxes already paid in Hong Kong by electronically filing Form 67 before the due date of filing your return.
• In Hong Kong (for NRIs/Hong Kong residents earning in India):
  • Provide the necessary documents (TRC, PAN, Form 10F) to the entity in India that is paying the income.
  • The payer in India will then deduct TDS at the lower DTAA rate. This process often involves filing Form 15CA and 15CB for NRIs.
  • When filing their tax return in Hong Kong, they can typically claim a credit for the taxes paid in India to avoid double taxation.

DTAA Impact on NRIs, Investors, and Businesses

The agreement has a significant positive impact on all stakeholders involved in cross-border activities between the two jurisdictions.

• For NRIs: It simplifies tax obligations on income from India, such as from property investments, fixed deposits, or NRO accounts, which have specific taxation rules.
• For Investors: It provides clarity on the taxation of capital gains and dividends, which is crucial for making informed investment decisions, especially for those considering the top cities in India for NRI property investment.
• For Businesses: It creates a stable and predictable tax environment, which reduces risk and encourages companies to use the jurisdictions as strategic hubs for investment and services.

How NoBroker Can Help with NRI Services?

Handling property matters and tax compliance from abroad can be overwhelming for NRIs. With expertise in taxation, property management, and legal documentation, NoBroker simplifies this process. By guiding the DTAA between India and Hong Kong, the platform ensures NRIs claim rightful benefits, manage TDS obligations, and file necessary forms with ease. Whether it’s rental management, resale transactions, or legal due diligence, NoBroker offers end-to-end support. This ensures that global Indians maintain financial efficiency, safeguard investments, and enjoy a hassle-free experience when managing property in India.

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